Market Overview

McDonald's Is Behind The Spicy Trend...And It Could Hurt Sales

McDonald's Is Behind The Spicy Trend...And It Could Hurt Sales

TheStreet's Brian Sozzi argued last week that McDonald's Corporation (NYSE: MCD) lags competitors in the spicy food trend – a mistake that may hurt its performance. At present, McDonald's is only testing a Spicy McChicken sandwich in select markets as a limited-time offer, according to McDonald's spokeswoman Lisa McComb. McComb did not reveal further where those markets were.

However, consumers have indicated that they want spicy, bold flavors. Sozzi pointed to a Technomic research report that showed the number of consumers with interest in hot or spicy foods increased by 8 percentage points since 2009 – from 46 to 54 percent.

A number of factors are behind the shift, including the Millennial generation's desire to experience ethnic cuisines and even taste "extreme food and flavors."

PepsiCo, Inc. (NYSE: PEP) capitalized on this trend with Doritos Roulette – a bag that includes an average of one in six spicy chips for regular flavored chips.

"The new flavor has been a hit," Sozzi said, "with Pepsi CFO Hugh Johnston calling out Roulette as one of the new products helping driving sales in the company's second-quarter results."

In August, Restaurant Brands International Inc's (NYSE: QSR) Burger King announced it would launch spicy chicken fries. That product took more than one year to develop, according to reports.

Wendys Co (NASDAQ: WEN), Yum! Brands, Inc. (NYSE: YUM), and Buffalo Wild Wings (NASDAQ: BWLD) all have experimented with spicy as well.

McDonald's, of course, has been struggling with falling same-store sales, a trend that, thus far, has not impacted its stock price. Compared to its competitors, McDonald's gained 3.6 percent year to date, while just Yum Brands and Buffalo Wild Wings have outperformed, gaining 9.4 and 5 percent, respectively.

However, slumping sales has impacted the company, forcing a new CEO to take the helm last quarter. It is unclear how much more patient investors will be.

Posted-In: Brian Sozzi Buffalo Wild Wings McDonald'sAnalyst Color Short Ideas Restaurants Trading Ideas General Best of Benzinga


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